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The Human Side of the Medicaid Debate

April 18, 2013 J,

The Human Side of the Medicaid Debate

by Tom Jenney, Arizona Director, Americans for Prosperity

(link to printable pdf version)

I.  AHCCCS does not necessarily mean access

There is a lot of talk about the tax and budget numbers involved in the proposed expansion of Arizona Medicaid (AHCCCS, pronounced “access”) under ObamaCare (PPACA).   While those numbers are important, and argue strongly against expanding Medicaid, the most important thing to think about is the human cost of the proposed measures.  The Medicaid expansion would push between a quarter million and a half million Arizonans — our friends, our family members, our neighbors — into a government-controlled health insurance scheme.   We should take a careful look at how those human beings would be affected.

Medicaid is a broken system that provides unacceptably poor care for our country’s most vulnerable persons.  As government continues to cut provider reimbursements, doctors are dropping Medicaid patients.  In a recent study, one out of three doctors nationwide admitted that their practices are not accepting Medicaid patients.  In Arizona things may be somewhat better, but according to the Kaiser Family Foundation, 23 percent of Arizona doctors are saying that they will not accept AHCCCS patients.

Combine large increases in the Medicaid population with a declining number of doctors, and the result will be longer waiting times for patients.  In medicine, longer waiting times often mean discomfort, disability and death.   Worse still, Big Government is pushing the American medical profession away from the tradition of the Hippocratic Oath and toward a brave new world in which health care will be dispensed according to a veterinary ethic.  (For more about that, see our blog post, Will President Obama scratch me behind the ears?)

Supporters of the Medicaid expansion have produced many stories of persons in the AHCCCS program who have survived life-threatening illnesses because they had access to high-quality health care.  The first part of the stories is undeniably compelling.  We all believe that we should do everything we reasonably can to make sure that as many citizens as possible can get lifesaving and life-improving medical services when they are needed.  The problem is with the second part of the stories, in which pro-expansion advocates claim that people’s participation in the AHCCCS program is what gave them access to high-quality health care services.  In reality, AHCCCS does not necessarily mean access

My friend Jeff, a surgeon in Phoenix, sometimes finds himself doing palliative surgery — surgery designed to make patients more comfortable at the end of life, rather than life-saving surgery — on late-stage cancer patients who were ignored or deferred by providers working within the Arizona Medicaid system.  In some cases, those persons could have been saved, had they received attention sooner.  But they found it very difficult to find providers — primary care physicians, oncologists, radiologists, and surgeons — who would take AHCCCS patients.  Those AHCCCS patients were treated like second-class medical citizens, and became victims of deadly waiting periods.

Numerous studies show that Medicaid patients have significantly worse health outcomes than those on almost any other system, including Medicare or private insurance.   What is more surprising, and profoundly disturbing, are the results of studies showing that patients with no insurance at all often get better treatment than Medicaid patients.  For example, a University of Virginia study looking at 893,000 major surgical operations from 2003 to 2007 found that a patient on Medicaid was 13 percent more likely to die than the same patient — controlling for wealth, ethnicity, region and health background — without any kind of insurance.  The Medicaid patient also spent 50 percent longer in the hospital and cost 20 percent more.  (For information about other studies demonstrating bad outcomes in Medicaid, start here: http://tinyurl.com/gottliebwsj)

In response to such studies, some expansion proponents have cited a recent New England Journal of Medicine study purporting to show that earlier Medicaid expansions in three States, including Arizona after the voter-approved expansion of AHCCCS in 2000, led to improved mortality outcomes for the individuals who were covered.  But as the authors of the NEJM study point out in their conclusion, the results from the States analyzed “are largely driven by the largest (New York), so our results may not be generalizable to other states.”  Further, New Mexico was used as the control for the Arizona results, so there may be multiple confounding factors that don’t allow for an apples-to-apples comparison.  Finally, as the authors state, their analysis “is a nonrandomized design and cannot definitively show causality.”

So far, the only attempt at a randomized study is the Oregon Health Insurance Experiment (OHIE), under which Oregon assigned 10,000 people at random to Medicaid.  The result after the first year is that are were no improvements to objective measures of health outcomes — including mortality — for the Medicaid population, compared to the control population.   As the Cato Institute’s Michael Cannon reports, that finding “is consistent with a previous study, coauthored by one of the OHIE researchers, that found no evidence that Medicare (which covers a much older and sicker population) saved any lives even ten years after its introduction.”

II.  Fiscal costs are human costs

Before talking about solutions to Arizona’s health care problems, we should remember a point that should be obvious, but that is often forgotten in health care debates: Taxpayers are people, too.  So are the purchasers of private insurance.  The expansion of Medicaid would harm state and federal taxpayers, and it would do nothing to help the purchasers of private insurance.  In Arizona, we know these things, because we’ve done this before.

As the Goldwater Institute’s Christina Corieri has documented, none of the promised fiscal results of Arizona’s last Medicaid/AHCCCS expansion (enacted by voters through Prop 204 in 2000) actually materialized.  The proponents of Prop 204 promised that the AHCCCS expansion would save money in the state budget.  The Joint Legislative Budget Committee was somewhat wiser, knowing that the expansion would cost the state money.  The committee’s projection was that covering the Prop 204 population would cost $389 million in 2008.  The actual cost was $1.623 billion — four times as expensive as projected.  According to the Kaiser Family Foundation, while Medicaid costs nationwide grew by 6 percent per year, costs in Arizona grew 12 percent per year.

As Corieri points out, when Arizona passed Prop 204, it was estimated that roughly 129,000 people would come out of the woodwork to join the program.  But by 2003, the actual number was approximately 250,000 – almost double the original estimate.  State taxpayers absorbed much of the cost of the expansion.  Indeed, the fiscal deficit caused by the Prop 204 AHCCCS expansion was one of the biggest factors that pushed Governor Brewer and a legislative majority to put the Prop 100 sales tax on the state ballot in May 2010.

To the extent that the federal government would subsidize the new Medicaid expansion, the borrowed money would come from future taxpayers, including our children and grandchildren.  The borrowing would also crowd out job-creating private-sector investments via the loanable funds markets.  Again, taxpayers are people, and heavy taxation prevents them at the margin from making certain purchases — including the purchase of high-quality private health insurance plans.

Using Congressional Budget Office cost projections, if Arizona and the other States that are currently on the fence join the 16 States that have already rejected the Medicaid expansion, the savings to federal and state taxpayers would be more than $400 billion between now and 2022.  That’s real money — even in Washington, DC!

As for the purchasers of private insurance plans, expanding Medicaid/AHCCCS would do nothing to relieve their soaring insurance premiums.  In pushing for this latest expansion, Governor Brewer’s office claims that uncompensated care results in a “hidden tax” of $2,000 per family per year that is added to the average Arizona family’s insurance premiums.  Expansion proponents suggest that the expansion will solve the problem of uncompensated care and eliminate the “hidden tax.”

The proponents of the Prop 204 expansion also claimed that they were going to relieve the state’s uncompensated care problem.  But according to a Lewin Group study, uncompensated care in Arizona increased by an average of nine percent per year during the first seven years of the Prop 204 expansion, and the average family’s health insurance premium increased from $8,972 in 2003 to $14,854 in 2011 – a 66 percent increase.

(Further, Florida’s Foundation for Accountable Government, using Census data, shows that Arizona’s uninsured population hovered around 19 percent after the first Medicaid expansion — suggesting that the expansion did little, if anything, to reduce the portion of Arizonans without insurance.)

Even if Arizona policymakers decide to discount the human cost of the Medicaid expansion as it affects state and federal taxpayers, and even if they decide that it is morally permissible to make false promises of relief for the purchasers of private insurance plans, the enormous fiscal costs of the proposed Medicaid expansion should force us to confront another moral issue:  Is it moral or responsible to lure vulnerable people into becoming dependent upon an increasingly insolvent government — a government that will only be able to cut health care costs by rationing services? 

III.  What Arizona should do instead of expanding Medicaid

1)  In the short run, part of the solution is to backfill/restore the Prop 204 population, but only as normal funds become available for that purpose.

But as we explained above, putting people on AHCCCS — simply handing them a Medicaid card — does not mean they’re going to get access to quality health care (they would be better off getting private insurance through their employers, if they can find jobs).  We should bear in mind that the Arizona Legislature has no legal obligation to backfill the Prop 204 population: presented with a legal challenge, the courts decided upon the plain language of Prop 204, which says that the Legislature does not have to cover that population unless there is adequate funding — and the courts determined that adequate funding is a political, not a judicial, question.  (Also, the voters have declared, via Prop 101 in 2004, that they do not want citizen initiatives to dump unfunded spending mandates on the Legislature.)

Further, the federal government will not fail to renew Arizona’s Medicaid waiver.  On the constitutional front, the United States Supreme Court ruled by a 7-2 majority in last summer’s ObamaCare case that the federal government cannot coerce States into doing the Medicaid expansion.  On the political front, the Obama Administration would look terrible if it did not renew the waiver: it would be cutting off its liberal nose to spite the face of Arizona.  If it chose not to renew the waiver, the Administration would: a) give the lie to its claims to want to help poor people; b) pull the plug on what is often touted as the best Medicaid program in the country; and, c) demonstrate that it is heavy-handed and overbearing in the middle of its campaign to try to convince undecided States that it is flexible when it comes to expansion options.

2)  In the short run, persons in the expansion population (those from 100 to 138 percent of the federal population) will be eligible for coverage on the federal exchange.

Of course, those people are above the poverty line, and many of them are already in or within close reach of the private insurance marketplace.  And there is a strong chance that the Oklahoma lawsuit (or a parallel lawsuit) will prevent the federal exchanges from going into operation.  But participation in the exchange would give those persons the opportunity to purchase health insurance from a menu (a limited, and increasingly worse, menu) of quasi-private plans, which at least initially will yield better medical outcomes than Medicaid/AHCCCS.  Further, the exchange plans would cost participants about two percent of their income, so they would have a little skin in the game, giving them a healthy dose of fiscal responsibility.  Finally, the State of Arizona would not have to bear the costs of operating the federal exchange.

3)  Arizona should immediately pass a medical price transparency reform mandating that health care providers provide cash prices to their customers.

By creating transparency, we would introduce greater price competition to our health care marketplace, letting the market guide consumers toward optimal health care choices.  By putting downward pressure on health care prices, the reform would help local businesses that are self-insured or that depend on high-deductible medical insurance plans.  Price transparency would also help to prevent fraud and over-billing.  (Unfortunately, on April 12, Gov. Brewer vetoed SB 1115, a health care price transparency reform bill.)

4)  Arizona should immediately pass a reform allowing our health insurance consumers to shop for regulated health insurance plans offered in other States.

Currently, Arizona’s health insurance companies are a government-created cartel, shielded from out-of-state competition by protectionist legislation.  Combined with heavy legislative coverage mandates, the result is higher premiums for health insurance plans, which then cause consumers on the margin to become uninsured.  Arizona should allow its health insurance consumers to buy cheaper plans available in other States, regardless of whether consumers in other States are allowed to buy Arizona plans.  (Unfortunately, in 2011 Gov. Brewer vetoed SB 1593, which contained a version of this reform.)

5)  Arizona should immediately pass “Good Samaritan” legislation indemnifying medical professionals against liability when they render charitable care to indigents.

6)  Arizona should pass a “loser pays” rule and other tort reforms to discourage frivilous medical malpractice lawsuits.

7)  Arizona should allow unlimited tax deductions, calculated at Medicare coding rates, for medical professionals who provide charitable care to indigents.

8)  In the medium run (i.e., beginning in 2017), Congress needs to block grant Medicaid funds to the States, and allow States to create premium support systems and health savings accounts to give low-income citizens access to high-quality, low-cost private health insurance plans.

9)  In the medium run (i.e., beginning in 2017), Congress needs to remove government-created obstacles to the creation of a nationwide free-market health insurance marketplace.  It should start by repealing the entire corpus of ObamaCare/PPACA.

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